Government Pension Fund Global Third quarter 2019 Oslo, 30 - - PowerPoint PPT Presentation

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Government Pension Fund Global Third quarter 2019 Oslo, 30 - - PowerPoint PPT Presentation

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Government Pension Fund Global Third quarter 2019 Oslo, 30 October 2019 Market value increased to 9,742 billion kroner Billions of kroner. As at 30.09.2019 10,000 10,000 Value Percentage share 9,000 9,000 Equity investments 6,729 69.1

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SLIDE 1

Government Pension Fund Global

Third quarter 2019

Oslo, 30 October 2019

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SLIDE 2

Market value increased to 9,742 billion kroner

Billions of kroner. As at 30.09.2019

2 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 09 10 11 12 13 14 15 16 17 18 19

Fixed income Real estate Equity

Value Percentage share Equity investments 6,729 69.1 Unlisted real estate investments 268 2.8 Fixed-income investments 2,744 28.2 Fund 9,742 100

Source: Norges Bank Investment Management

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  • 750
  • 500
  • 250

250 500 750

  • 750
  • 500
  • 250

250 500 750 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

Krone rate Return Inflow/withdrawal Total

236 billion kroner in return

Billions of kroner

3

Source: Norges Bank Investment Management

YTD Q3 2019 Return 1,231 236 Inflow 4

  • 5

Krone rate 251 349 Total 1,486 580

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SLIDE 4

1.6 percent quarterly return

Measured in the fund’s currency basket. Quarterly return. Percent

4

  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 10

  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 10 09 10 11 12 12 13 14 15 15 16 17 18 18 19

1.6

Source: Norges Bank Investment Management

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SLIDE 5

Strongest return for fixed income

Measured in the fund’s currency basket. Percent

5

  • 15
  • 10
  • 5

5 10 15

  • 15
  • 10
  • 5

5 10 15 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

Equity investments Real estate investments Fixed-income investments

2019 Q3 2019 Equity investments 17.0% 1.3% Unlisted real estate investments 4.1% 1.6% Fixed-income investments 8.5% 2.4%

Source: Norges Bank Investment Management

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Fund’s relative return

Quarterly return relative to reference index. Percentage points

6

  • 0.6
  • 0.5
  • 0.4
  • 0.3
  • 0.2
  • 0.1

0.0 0.1 0.2 0.3 0.4 0.5 0.6

  • 0.6
  • 0.5
  • 0.4
  • 0.3
  • 0.2
  • 0.1

0.0 0.1 0.2 0.3 0.4 0.5 0.6 09 10 11 12 13 14 15 16 17 18

0.01

Equity and fixed-income investments until end of 2016. Source: Norges Bank Investment Management

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SLIDE 7

Changes in value since 1996

Billions of kroner

7

30.09.2019 30.06.2019 31.12.2018 Total inflow of capital* 3,378 3,382 3,371 Total return on fund 4,897 4,660 3,666 Total management fees

  • 47
  • 46
  • 44

Changes due to fluctuations in krone 1,514 1,165 1,263 Market value of the fund 9,742 9,162 8,256

*Total inflow of capital is adjusted for accrued, not paid, management fees. Source: Norges Bank Investment Management

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SLIDE 8

Key figures per third quarter

Measured in the fund’s currency basket. Annualised. Percent

8

Since 1.1.1998 Last 10 years Return on fund 5.92 7.63 Annual inflation 1.78 1.73 Annual management costs 0.08 0.07 Annual net real return on fund 3.99 5.72

Source: Norges Bank Investment Management

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SLIDE 9

80 90 100 110 120 130 80 90 100 110 120 130 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19

FTSE Global All Cap index* Equity part of the fund's benchmark index S&P 500 (US) Stoxx Europe 600 (Europe) MSCI Asia Pacific (Asia)

Developments in equity markets

Measured in the fund’s currency basket (S&P 500 and MSCI Asia Pacific in USD, Stoxx Europe 600 in EUR). Indexed total return (31.12.2018 = 100)

9

FTSE Global All Cap index* Equity part of the fund’s benchmark index S&P 500 Stoxx Europe 600 MSCI Asia Pacific Q3 2019 1.8% 1.2% 1.7% 2.7%

  • 13%

Year-to-date 18.2% 16.8% 20.6% 20.3% 9.2%

Source: Bloomberg * Excluding Norway

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SLIDE 10

10-year government bond yields

Percent

10

  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19

US Italy UK Spain Japan Germany

Source: Bloomberg

US Italy UK Spain Japan Germany 30.09.2019 1.66% 0.82% 0.48% 0.14%

  • 0.22%
  • 0.57%

31.12.2018 2.68% 2.74% 1.28% 1.41%

  • 0.01%

0.24%

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SLIDE 11

Highlights

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▪ The market value of the fund increased by 580 billion kroner to 9,742 billion kroner ▪ The fund returned 1.6 percent in the third quarter of 2019 ▪ The return on the fund was 0.01 percentage point higher than the return on the

benchmark index

▪ At the end of the quarter, the fund was invested as follows:

  • Equity investments

69.1 percent

  • Unlisted real estate investments

2.8 percent

  • Fixed-income investments

28.2 percent

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SLIDE 12
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SLIDE 13

Fund value and GDP

Market value in percent of GDP and mainland GDP. As at 30.09.2019

13 50 100 150 200 250 300 350 50 100 150 200 250 300 350 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Percent of mainland GDP Percent of GDP

Source: Norges Bank Investment Management, Statistics Norway, Ministry of Finance GDP for third quarter 2019 is an estimate based on numbers from the national budget 2020

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Household wealth and value of the fund

14 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2,000 4,000 6,000 8,000 10,000 12,000 14,000 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Gross wealth Net wealth Value of the fund

Source: Norges Bank, Norges Bank Investment Management

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The fund larger than petroleum wealth

Billions of kroner*

15 2,000 4,000 6,000 8,000 10,000 2,000 4,000 6,000 8,000 10,000 2009 2019 Government share

  • f remaining

petroleum wealth Value of the fund

Source: Ministry of Finance, Norges Bank Investment Management * Petroleum wealth is measured in 2020-kroner, while the value of the fund is measured in current value as at 30.09.2019

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Fund cash flow larger than petroleum income

16 50 100 150 200 250 300 350 400 450 50 100 150 200 250 300 350 400 450 97 99 01 03 05 07 09 11 13 15 17 19 21 Government net petroleum income Fund cash flow

Source: Statistics Norway, Ministry of Finance (National budget 2020), Norges Bank Investment Management (Accounts) Numbers for 2019 and 2020 are estimates from the national budget.

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SLIDE 17

Income and savings

Billions of 2020-kroner

17

  • 500

500 1,000 1,500

  • 500

500 1,000 1,500 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 Gov net cash flow Transfers to the fund

Source: Ministry of Finance, National budget 2020

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Income, savings and return

Billions of 2020-kroner

18

Source: Finansdepartementet, Nasjonalbudsjettet 2020

  • 500

500 1,000 1,500

  • 500

500 1,000 1,500 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 Gov net cash flow Transfers to the fund Fund real return

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SLIDE 19

Accumulated value of return as at 25.10.2019. Billions of kroner

19

5,026 billions of kroner in return

  • 1,000

1,000 2,000 3,000 4,000 5,000 6,000

  • 1,000

1,000 2,000 3,000 4,000 5,000 6,000 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Norges Bank Investment Management

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The Norwegian oil economy

Billions of 2020-kroner. Accumulated

20

Source: Statistics Norway, Ministry of Finance, Norges Bank Investment Management

Real return Net inflow to the fund Petroleum income spent Production costs, etc. Petroleum sales Gov net petroleum income Gov Pension Fund Global

  • 12,000
  • 10,000
  • 8,000
  • 6,000
  • 4,000
  • 2,000

2,000 4,000 6,000 8,000 10,000

1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019

Production costs Petroleum income spent Real return Inflow to the fund

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SLIDE 21

Real return exceeds spending

Billions of 2020-kroner. Accumulated

21

  • 1,000

1,000 2,000 3,000 4,000 5,000 6,000

  • 1,000

1,000 2,000 3,000 4,000 5,000 6,000 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 Petroleum income spent Fund real return

Source: Statistics Norway, Ministry of Finance, Norges Bank Investment Management

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SLIDE 22

Strategy 2020-2022

Norges Bank Investment Management

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SLIDE 23

23

Fund strategy

▪ Complement the fund’s investments in equities and fixed income

by investing in real estate and renewable energy infrastructure Ownership strategy

▪ Exercise our ownership role to safeguard the fund’s long-term

economic interests Investment strategies

▪ Utilise a set of diversified investment strategies in a risk-controlled

and low-cost manner Management strategy

▪ Foster a global, performance-oriented and efficient investment

  • rganisation

Strategy Plan 2020-22

Four chapters

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SLIDE 24

24

We manage a global portfolio dominated by public market equity risk. We will develop alternative risk measures for the fund. There are investment opportunities that cannot be defined through an index. The reference portfolio serves as a starting point for our investment strategies.

Strategy Plan 2020-22

Fund strategy

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25

We target a real estate portfolio, made up of both listed and unlisted assets, of 5 percent of the fund. We target a portfolio of renewable energy investments of around 1 percent of the fund towards the end of this strategy period.

Strategy Plan 2020-22

Fund strategy

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We focus on corporate governance issues and areas of long-term financial relevance. We take a principle-based approach and are transparent about our activities.

Strategy Plan 2020-22

Ownership strategy

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We will contribute to the strengthening and further alignment of corporate sustainability reporting standards across markets. By the end of the strategy period, we aim to publish all our voting instructions ahead of shareholder meetings where this is practicable.

Strategy Plan 2020-22

Ownership strategy

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28

Our investment strategies are complementary and tailored to the fund’s unique characteristics. Meeting companies is an essential part of

  • ur investment process.

We aim to cover around 1000 companies in detail.

Strategy Plan 2020-22

Investment strategies

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29

Our presence in global markets is essential to execute our overall mandate. We believe that performance follows from in-depth market understanding and an investment and result-oriented culture.

Strategy Plan 2020-22

Management strategy

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We promote transparency, as this motivates our organisation to be result-

  • riented and performance-driven, and we

welcome public scrutiny of our results. We continue to manage the fund in a prudent and efficient manner. We aim for an adaptable organisation where teams have a high degree of autonomy.

Strategy Plan 2020-22

Management strategy

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SLIDE 31

A global organisation

31

SHANGHAI SINGAPORE OSLO NEW YORK LONDON

601 emplo 601 employees ees

38 nationalities

As at 31.12.2018

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SLIDE 32

32

Our mission

Safeguarding financial wealth for future generations

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Government Pension Fund Global

Third quarter 2019

Oslo, 30 October 2019